The Influence of Culture on Decision-Making in Transnational Organisations

Comparison of Indian and German Multinationals in Case of Investment and Management under Uncertainty

Abstract

Decision-making is a complex process which is more so in the case of multinationals which are transcultural hierarchies, a product of historical global processes that have changed shape over time from Global companies insensitive to the local environment to Transcultural companies with ‘differentiated network’ (Nohria &Ghoshal, 1997). Although Indian multinationals, in comparison to German multinationals, are a recent historical phenomenon, they have managed to develop a decentralised complex and multifaceted pattern of successful relationships in their organisational structure and management by using the instrument of mergers and acquisitions. They have also managed to turnaround loss –making subsidiaries to profit making subsidiaries without retrenchment. This has been achieved despite the uncertainty in the calculation of risk in these units (Business Standard, 2006). German multinationals, on the other hand, have been slow in this process of change. Moreover, German multinationals have used the instrument of merger and acquisition to realise economies-of-scale, which has usually resulted in retrenchment of workers both at home and in subsidiaries (Lane, 2003). This research concentrates on the analysis of informal institutions that act as agencies in German and Indian multinationals, which influence the dynamics of information flow and knowledge development. Since the basic cultural mechanisms which act as the driving force in the society also influence the institutions of companies, this research will analyse and compare the influence of culture in institution building and decision-making pattern in uncertain situations.

The research delineates normative, symbolic, institutional and economic factors and hence is interdisciplinary in its approach. It uses instruments from the field of Sociology, Management, Religious science, Philosophy, and Psychology to deal with the subject.